Friday, October 24, 2014

Powertech Uranium's Takeover By Some Shady Financiers In East Asia Moves Forward. Stock Market Is Underwhelmed.

Powertech Uranium is the company that wants to punch holes into the southern Black Hills in hopes of extracting uranium from the water below. The process will forever alter the water quality, which is the subject of much debate in the scientific community. My view is that there's no margin for error when it comes to tampering with water, so I'm opposed to the plan. More compellingly, I wonder about the financial underpinnings of Powertech Uranium itself, especially as it's now moving ahead with its plans to unify with some Asian firms that have a downright shady history. One of the them is Blumont Mining out of Singapore, an enterprise that is in serious trouble with its regulators and the local police--a situation I brought up here a few weeks ago.Of more immediate interest is that the Toronto Stock Exchange, which is where Powertech stock is listed and traded, has just given conditional approval to this combination. My background in finance tells me that this should be good news for the stock, taking its price higher. Yet the immediate reaction to the news has been negative, with Powertech stock trading at an all-time low of just 3.5 cents a share in recent days. This merits some analysis, which I happily present here in the form of a blog post by Jim Woodward, a Colorado-based CPA who follows developments in this drama closely via his site Powertechexposed.com. I'd say the Blumont Mining connection is the one to keep an eye on. The vibes coming out of that company aren't very good. Here's Jim's piece:

NEW October 23, 2014 - The more things change, the more they stay the same, particularly when it comes to Powertech/Azarga's investor communications. Tuesday evening, Azarga officials were positively giddy as they tweeted out "Toronto Stock Exchange approved our merger..." and "$5m cash in the can and the highest grade project among US ISR peers". The next day, Powertech issued a news release that was more specific and not quite as upbeat. According to the release, the TSX "conditionally approved" the "merger" between Powertech and Azarga, the proposed $5 million private placement, and a proposed one for ten reverse stock split. True to form, Powertech did not fully disclose the TSX's conditions, only mentioning a four month lock-up period on shares issued pursuant to the private placement. And describing the transaction between Powertech and Azarga as a "merger" is misleading. The actual written agreement between the companies correctly describes it as a reverse takeover of Powertech by Azarga. The TSX refers to these transactions as "backdoor listings", because a privately-held company (Azarga) bypasses the initial public offering process and assumes the public listing of the target company (Powertech). TSX rules consider a transaction to be a backdoor listing if the transaction results in the existing shareholders of the listed company (Powertech) holding less than 50% of the voting power in the new entity, and if there is a change in effective control. In the proposed Powertech/Azarga deal, existing Powertech shareholders will be left with only 33% of the company, and control will shift to a handful of Azarga executives as well as controversial Singaporean firm Blumont Group. The fine print disclaimer on Powertech's news release notes that Powertech "expects" and "assumes" that "the TSX will approve the proposed transaction", implying that final approval has not occurred, and conflicting with the definitive statement made on Azarga's Twitter page. Perhaps this is why on the same day the news release was issued, Powertech's stock price dropped to an all-time low of three cents. One might expect that demand for Powertech shares would increase on the news, but the opposite was true. And today, the stock price rose to only 3.5 cents as a mere 30,000 shares were traded, worth only $1,050 CAD.

6 comments:

I have head rumblings that Rounds' relative (sister?) is on the board of Powertech....Im sure she a true scientist and understands the fragile Madison aquifer directly within reach of this type of mining. AND I heard an electrical Engineer say that we have all the uranium rods we can ever use for nuclear energy...any new uranium is for weaponry and most likely will be sold to our enemy (Communist China, in their own words they have said we are their #1 enemy)

Here's Powertech's website. Couldn't find a listing of a board of directors, but did find a management list that had a couple of independent directors listed by name, none neither of whom seemed to have a local connection. http://www.powertechuranium.com/s/Home.asp

China already has nuclear weapons and uranium, you dork. They could produce more nuclear weapons at any time they like. But they don't want to, because they've got a dedicated No First Use policy and think that even a single successful counterstrike is sufficient to deter aggression. This is why they've kept under 200 missiles since the 60 (the US and Russia have 7000 each).

If you want to be scared about China, worry about their online theft and hacking capabilities. Or worry about the potential that their government will fall and that region will go into a full civil war with possible Russian intervention and possible destabilization of Korea. Or worry about the massive amounts of pollution they produce and the effects it will have on their country as well as ours and others around the globe.

It seems like an especially good idea for us to be conservative with our water supply's safety given that our water reservoirs and ones throughout the country will be near empty in 50 years at current rates of consumption.

I may have commented twice, I commented once then refreshed but did not see my comment appear. If I commented twice, then if my other comment is connected to my Google account please delete it for me. If they are identical except for this addendum, please delete this comment instead. If I only commented once, just ignore this section altogether. Thanks!

You're good. I'm with you. How can we be too cautious about our water supply, especially in a perenially arid region like western South Dakota, especially considering that the uranium down there isn't a vital necessity to this country?

About Me

I'm a businessman and writer living in the Black Hills of South Dakota. I've written articles and commentary for 25+ years. I was a member of the Chicago Board Options Exchange and the founder of a futures brokerage firm for a total of twenty years and I own commercial real estate in western South Dakota. I served three years ('66-'69) in the U.S. Marine Corps, including a 13-month tour of duty in Vietnam as a radioman. My wife and I have two grown daughters. We make our home in Rapid City, South Dakota